Ban on foreign investment in Australian real estate unlikely to increase housing affordability: experts

Foreign investors have been barred from buying existing property unless they live, work or study in Australia, with the changes also banning temporary and foreign residents from doing so unless they are awarded an exception. 

The ban will initially run from 1 April 2025 until 31 March 2027 and may then be extended.  

Deanne Sevastos, an expert in property law at Pinsent Masons, said: “The temporary ban on the purchase of established dwellings by foreign buyers, effective from 1 April 2025 to 31 March 2027, aims to alleviate the housing crisis by increasing the availability of existing homes for local buyers.”

“However, this measure may be criticised for potentially reducing foreign investment in the real estate market, which could negatively impact property values and economic growth,” she said. 

“Additionally, the ban's effectiveness is questionable as it may not address the root causes of housing affordability issues, such as supply constraints and rising construction costs.” 

Ahead of the election, A$5.7 million (approx. US$3,65 million) was allocated by the Albanese government in its budget update to strengthen the ATO’s foreign investment compliance team ahead of the ban coming into effect.

The Australian Taxation Office (ATO) and Treasury was also allocated AU$8.9 million over four years from 2025-26 to launch an auditing program that targets land banking by foreign investors.

Vanessa Scrivener, an expert in property law at Pinsent Masons, said: “Housing affordability is influenced by many interrelated factors such as supply constraints, interest rates, and broader economic conditions.” 

“While restricting foreign purchases of established dwellings could help address housing affordability and make more homes available to Australian residents by decreasing demand, the policy might shift foreign investment toward new housing developments, which could inflate off-the-plan prices,” she said. 

“While this may be a step toward addressing affordability, it is unlikely to be a silver bullet without complementary policies to increase housing supply and tackle structural issues in the property market.” 

Foreign entities looking to acquire interests in land in Australia, through direct leasing or by acquiring Australian entities, must gain Foreign Investment Review Board (FIRB) approval before doing so and notify the ATO to record on the Register of Foreign Ownership of Australian Assets.

China was the largest source of approved residential real estate proposals by value in the July to September quarter of 2024 with A$400 million, followed by Hong Kong, Taiwan, Vietnam and India’s A$100 million, according to FIRB’s most recent quarterly report. 

The total value of the 1123 foreign real estate investments in Australia during this period reached A$1.3 billion.